Is there an echo in here?

BOC Governor Mark Carney has made some comments on the Canadian housing market being overheated lately. The first paragraph of this Vancouver Sun article sounds kind of familiar:

The Canadian housing market is overheated, but everything is in place for it to moderate naturally with no further need for government intervention, according to the governor of the Bank of Canada.

It was Patriotz that pointed out this Washington Post article from 2005:

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

Of course where those two articles differ is the comment on local markets. Bernanke specifically did not address local market bubbles, where Carney calls them out specifically:

“Given such developments, one cannot totally discount the possibility that some pockets of the Canadian housing market are taking on characteristics of financial asset markets, where expectations can dominate underlying forces of supply and demand,” Carney’s notes say. “The risk is that expectations become extrapolative, prompting the classic market emotions of greed and fear – greed among speculators and investors – and fear among households that getting a foot on the property ladder is a now-or-never proposition.”

But monetary policy is Canada-wide, Carney said.

“We can’t manage monetary policy for a specific housing market or specific province. We’ve got to manage it for the country as a whole to achieve the inflation targets.”

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patriotz
Member

Canadian housing market in for "substantial decline":

http://www.theglobeandmail.com/globe-investor/inv

One think I disagree with – the speaker says that the banking crisis in the US was responsible for a large part of the decline there. I think he has it backwards – the decline was responsible for the banking crisis. Keeping the credit flowing by government guarantees as we have in Canada may stave off a banking crisis, but it will not keep prices from falling back into line with incomes. We got declines that were just as big in Vancouver in the 1980s and Toronto in the 1990s. And we will have the government holding the bag for bad mortgages just as in the US, only without the drama of a Fannie/Freddie rescue.

Boombust
Guest
Boombust

It is UNREAL how long this bubble has been going on. Pop the damned thing and get it over with, already.

vreaa
Member

Globe and Mail Video: 25% Basic Vanilla Pullback For Canada If Interest Rates Flat; For 'Unstoppable' Vancouver Pick Your Own Number [Ours is 50%-66%]

Carrick-Mandani Discussion

Still and partial transcript

http://wp.me/pcq1o-2zJ

Keeping An Eye On Th
Guest
Keeping An Eye On Th
Since we are memory lane: Saturday, December 23, 2006 David Lereah's Most Corrupt, Foolish and Ridiculous Quotes "If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years," said David Lereah, chief economist of the National Association of Realtors and author of "Are You Missing the Real Estate Boom?" "It's as if you had 500,000 dollar bills stuffed in your mattress." He called it "very unsophisticated." (Los Angeles Times Aug 28th, 2005) ———————————————————- "We're going to drop significantly, but it's not a balloon bursting," Lereah says. "This is a soft landing for the housing markets." (Business Week May 23rd, 2006) ———————————————————- "…housing activity will remain healthy for some time to come." – David Lereah, NAR’s chief economist, October 28, 2005 ———————————————————- “The continuing shortages of housing inventory are driving the price gains.… Read more »
jesse
Member

"We can’t manage monetary policy for a specific housing market or specific province."

Ah it's a mistake to think that since Carney cannot directly affect local markets that nothing is being done behind the scenes. The federal government can affect local markets, if it so chooses, and the latest bill C-3 seems to give them authority to do just that, should they choose to use it that is.

So why would Carney go on and on and on about the dangers of high real estate prices and debt, then turn around and say he can't do anything about it on a local level? When in meetings with the Minister of Finance, I don't think his comments are as as obtuse.

WFT?
Guest
WFT?

It is telling that in making the following statement Carney has given the definition of a word that we all know very well, a loaded word, which is why Carney didn't use it but instead gave the definition. That word is, "BUBBLE".

“Given such developments, one cannot totally discount the possibility that some pockets of the Canadian housing market are taking on characteristics of financial asset markets, where expectations can dominate underlying forces of supply and demand,” Carney’s notes say. “The risk is that expectations become extrapolative, prompting the classic market emotions of greed and fear – greed among speculators and investors – and fear among households that getting a foot on the property ladder is a now-or-never proposition.”

observer
Guest
observer

But Mr. Flaherty suggested that he is now more comfortable with the health of Canadian housing, saying categorically that he is not considering taking any further actions to cool the mortgage market here because there has been some moderation in the housing market. While there are some hot spots, such as the condominium market in Vancouver, those are not enough to prompt another change in mortgage rules, Mr. Flaherty said.

Globe and Mail

space889
Guest
space889
To Patriotz, I thought you said that all groups of society deserves our sympathies and no group should be discriminated against and not fit to live next to us. So if that's the case then I'm merely asking if you are ok with having drug recovery center, homeless shelter, etc next to your personally owned home that you paid $1M for. It's simple as that. I am merely asking you if you personally have no problem living next some group of people you might find undesirable and have your property which cost you a whole of money drop in a lot of value, all for social good. I'm not comparing Betty Fox to anyone btw. Nor am I defending "my heros in those towers". I have stated on many ocassions that I don't agree with their protest and I think… Read more »
Not much of a name..
Guest
Not much of a name..

@observer: He's a politician and his lips were moving…do you actually believe what he said?

space889
Guest
space889

@observer: No politician is going to take credit for popping this bubble. People don't like to see their own personal wealth go down even if it is a bubble or harmful to overall society. Something should be done as long as others pay most of the price. If any politican comes along and pop the bubble. It's unlikely those affected, which in this case is the majority, will likely vote for the said politician or the political party. The best we can hope for is he starts limiting government exposure and bailout money after the bubble pops.

jesse
Member

@space889: "No politician is going to take credit for popping this bubble."

Of course not, which is why if he does pop it, you won't know who to blame.

observer
Guest
observer

simple point – Vancouver is not important enough in the overall scheme of things in Canada. Most markets in Canada have elevated prices, but are not overheated by any stretch of the imagination. No politician of the national variety will enact policies to stem high prices in Vancouver. It is generally a local phenomenon that needs local policies. Carney essentially said this in his speech

Absinthe
Member
Absinthe
@space889: Most NIMBY arguments are on use and neighbourhood capability – safety, noise and traffic complaints, primarily. That's NIMBYism. My backyard is too swank to have people lurching about at 11 at night being noisy and attracting drug dealers. Or there's a school down the block and I'm irrationally afraid that people with schizophrenia will be violent, so will raise my NIMBY voice on the grounds that there will be an unacceptable risk to the kids. The thing is, neighbourhood use discussions are fair – that's why we have zoning – even if personally, the NIMBY folks often cause me to roll my eyes. However, when it crosses into charter territory is when you're saying the problem is who people *are*, and not what they *do*. Sure, lots of cultures have superstitions that are racist, sexist, homophobic, etc. – but… Read more »
Absinthe
Member
Absinthe

@Absinthe: Sorry! Housing Association. I said cultural association because of the argument to culture – which perhaps makes the point.

patriotz
Member

@observer:

Most markets in Canada have elevated prices, but are not overheated by any stretch of the imagination.

Every major market in Canada now has record high real prices, price/rent, and price/income.

Only exceptions are Calgary and Edmonton which are still down about 10% from their peak in 2007. But the above metrics are still higher than at any time before 2006.

Li Kai Shing
Guest
Li Kai Shing

I think this is all about the Bilderberg group who are die – hard (?) Boston Bruin fans.

This is all a master plan ,drafted over 30 years ago.

They manipulated the Hong Kong takeover…drove up RE prices hear…then produced genetically modified Canucks players.

Roberto Luongo is key…he has a microchip in his head and left toe.

For the last several seasons, we have been lulled into a false sense of security…..oooo…oooooo ..oooooooooooo this is Canucks year (Stir and repeat).

Then, at crucial time Luongo lets in cheap goal/s

This year…fans again sucked in…Bilderberg agents …. the Aquiloonies…pay Luongo more than worth..get fans hopes up.

Then after Game 2…..the microchip is engaged….and Loungo played the shits.

It was a master plan by Bilderberg Bruins fans.

WHAT, Update ……they haven't planted the microchip yet ?

Anonymous
Guest
Anonymous

@Absinthe: People can change the fact that they have schizophrenia?

patriotz
Member

@Absinthe:

Very well put, and the only thing I'd like to add is that a hospice was a designated use for the site in question before the condos were even built.

It is a university campus, after all.

space889
Guest
space889
@Absinthe: Probably because they figured such a reason like ambulances, etc wouldn't work and will make them look like snobs. On the other hand, they probably felt claiming culture issues will likely give them more clout. Especially since UBC is selling mostly to Asians, probably still majority HK and Taiwan which are more supersititous than rest. I'm sure there are probably quite a few who are actually deeply disburbed by this. The reason I say this is because some people, even university educated people, from HK are extremely supersititious to the point of absurd. However I still wouldn't call this racism or whatever Patriotz called it. I would still call it NIMBY for the fact that they don't oppose having hospice on UBC, just not next to them. If this hospice is located say next to UBC hospital, or beside… Read more »
observer
Guest
observer
patriot – no doubt the metrics you referenced are high, but being out of whack does not necessarily mean a steep price correction (a mild one is likely to occur however). It is not clear that price-to-income ratios must revert to the mean. It seems that under a low-rate environment, which is expected to persist, a higher asset price is sustainable. Most of the metrics you referenced are reflective of a period with much higher borrowing costs than currently is the case. Under higher cost constraints, it is likely that the asset will be priced lower. The question is what will a normalized interest rate mean? There is considerable debate among central bankers whether the new normal rate is the same as that which we observed pre-recession. A number have commented that the new normalized rate is actually lower. Current… Read more »
900kCrackHouse
Guest
900kCrackHouse

Are there any signs that the Vancouver market is slowing? Or is it insanity as usual right now?

patriotz
Member

@observer:

The other issue is supply.

You are making the common mistake of confusing total supply of dwellings with supply of dwellings for sale.

It is the latter which affects the market price and which can increase dramatically given the large number of of properties held by speculators, or shall we say "investors". Especially the empty ones.

Yalie
Guest
Yalie
“We can’t manage monetary policy for a specific housing market or specific province. We’ve got to manage it for the country as a whole to achieve the inflation targets.” I almost agree with Carney on this one… except for one glaring issue. The problem is the way inflation is calculated. StatsCan includes "shelter" as one of the components of CPI, but this does not include the cost to buy a house. This bizarre policy (also used in the US) has had the effect of pumping up house prices while central banks turn a blind eye and claim "no inflation here!" Mish had an amusing post from a couple years back on the absurdity of including conumer products but not house prices in the CPI: http://globaleconomicanalysis.blogspot.com/2009/1… Some quotes from "Email exchange with the Cleveland Fed": 3. If you expected the price… Read more »
observer
Guest
observer
– no I am very clear on what constitutes market supply. The low hanging fruit is obviously the number of listings and inventory of uninhabited new builds. Recent studies based on electricity usage (hydro) suggests that only about 4% of units in Van are uninhabited although the figures increases to about 10% in the d/t, yaletown regions. This makes sense given that there are a number of "vacation" properties down there. If these were not liquidated during the recession, I am doubtful they will be in the near future. for those suited homes, again, there will be demand. vacancies in the purpose-built stock is low – and don't say 2.9% is high because it is not. If prices are too high, people will rent, pushing up demand for product. While this may may mean some price declines, it still does… Read more »
jesse
Member

@observer: " and don’t say 2.9% is high because it is not."

It is in a historical context. The average vacancy rate of this type of dwelling has been about 1.2% over the past 20 years. The vacancy rate has been running at least 1 standard deviation above the average for 3 years and counting. So yes it is high. In addition based on CMHC analysis of the private market, and by property managers operating in Vancouver, the vacancy rate of the non core market is likely above 5%.

I swear I read your exact comment by some dude in San Diego 5 years ago. No, I'm probably wrong, that's completely different because of whatever.

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